UPDATE: Apologies - Europe clocks went back so we have another hour of trading (and stocks are surging!)
European equity markets are all closing down today with Spain leading the laggards down over 1% on the day. This is the seventh down day of the last eight for Europe's equity markets. Spanish bond spreads are wider for the sixth day of the last seven and now almost 60bps off their post-Draghi tights as once again the fast-money front-runners step away leaving a truer picture of the state of Europe. Interestingly, Italy underperformed Spain (in bond-land) today - something we haven't seen in weeks - which appears to be Italian bonds reverting their exuberance back to Italian stock levels. Notably, just as in the US, broad European stocks pushed a little higher into the close (after US early close) while credit markets bled weaker - closing near their worst levels of the day. EURUSD was down 30 pips or so (with an 80 pip hi-lo swing) - hovering around 1.29 - until it decided to zoom into the last few minutes, which pinged stocks a little.
Fed 'credibility' has boosted stocks from the start of its actions; the ECB, however, only since OMT. But as SocGen's cross-asset class research group notes, poor performance of the S&P 500 since QE3 announcement (-1.6%) may well be an initial sign of a loss of impact from the Fed’s policy, and US equity volatility is rising - catching up to Europe's.
"The sale of Treasury securities that was tentatively scheduled for today, Monday, October 29, will take place as scheduled, with a 10:15 AM open and 11:00 AM close. However, settlement will take place on Wednesday, October 31, not Tuesday, October 30. The purchase of Treasury securities previously scheduled for tomorrow, Tuesday, October 30, has been postponed, and the schedule of Treasury security operations will be updated in the coming days with details of the rescheduled operation. After today's sale, Treasury purchase and sale operations are anticipated to resume on Wednesday, October 31. Similarly, there will be no agency mortgage-backed securities (MBS) trading on Tuesday, October 30. MBS trading operations are anticipated to resume on Wednesday, October 31."
Remember the wetsuit purchased many years ago for that trip to Hawaii and never used once? It may be time to find where it is and clean it up, as "escaping from New York", in a worst case scenario is getting so problematic, swimming through the Hudson or East Rivers may soon be the only option. Moments ago, in a press conference, Andrew Cuomo reported that while the storm is behaving as predicted, as of 2pm today both the Holland and Brooklyn Battery tunnels will be closed. And if these are down, the Lincoln and Queens-Midtown can't be far behind, especially if the flood continues as expected.
Since the rumors and news of the Sovereign CDS ban began in Europe (due to officially be in place next week), sovereign CDS spreads (and their gross and net exposure) have been crushed. This would seem like a good thing for all the standard CDS-haters and speculator-blamers who believe that Europe's problems were 'caused' by these mean credit traders; but bonds haven't followed. Bonds have rallied but this is more consequence of front-running Draghi's OMT than CDS compression. The concern is, should we see a risk flare, the CDS market (and its basis traders) will not be there this time as a natural buffer (or protection provider) this time. Exactly as we noted here, the unintended consequence of regulating away the CDS market will be higher costs of funds as real-money will be considerably more risk averse in an unhedgeable event risk market - and we are already seeing exactly this in Spain.
On this lonely blustery day, with US equity markets closed, long-only managers around the US can go peacefully back to sleep as 'Kevin' has got our back. S&P futures (ES) managed a glorious ramp into the 915ET close to confirm a close above the vertically challenged 1400 level. Volume, as one would expect, is dismal but the 6500 contracts that ran thru in the last 2 minutes makes perfect sense (to someone we are sure). The equity futures market was on its own in this rampapalooza, as Treasuries slid to the lowest yields in two weeks, USD strengthened, and commodities dropped - all leaving ES significantly divergent from CONTEXT (broad risk-assets). Nothing but another episode of illegally Banging the Close (but don't hold your breath for the regulators to prosecute anyone, least of all the Liberty 33 residents) with your friendly New York Fed (and Citadel). Gold is higher - even with the USD up 0.25%.
...or not! As can be seen in the chart below showing the change in Spanish retail sales, there is nothing like a tax hike, in this case "Value Added", to completely obliterate any hope of increased economic transactions, monetary velocity or, well, general prosperity. In the least surprising data point of the day, Spanish retail sales plunged at their fastest rate on record (12.6% YoY) to complete the 27th month in a row of YoY drops. This nation whose economy is struggling through its second recession in three years and plagued by chronically high unemployment, has seen only three months of positive YoY comps for retail spending since November 2007. Whether this is a nation retrenching pure-and-simple on the back of anti-growth policies or an increasing amount of retail sales are completed in the gray market is unclear (as we discussed here); one thing is clear, Spain is bad and getting worse (bailout or no bailout), and as Reuters reports: "It's clear there are no signs the crisis is abating," economist at Nomura Silvio Peruzzo said. "The headline (retail) figures show a sharp drop and indicate that domestic demand is not going to be anywhere near what the government is anticipating."
Today's personal income and spending report for the month of September was just the latest datapoint confirming that the US consumer is once again massively cash-strapped and is eating, literally, into their savings. While Personal Income rose at the expected pace of 0.4%, Spending in the last month came well above expectations of 0.6%, printing at 0.8%, which meant that on a net basis Consumers, always hopeful, outspent themselves by a margin of 0.4%. This meant that the savings rate declined from 3.7% in August to a tiny 3.3% in September. This was the lowest Savings print in 2012, and higher only compared to last November's 3.2%, which in turn was the lowest print since the start of the second great depression. In other words, overeager consumers saw their nominal incomes increase... and decided to outspend said rise at double the rate of increase! At this pace, by the time Thanksgiving rolls out, US consumers will have no savings at all left to tap and living will be strictly a month to month activity. But wait, it gets worse. As the second chart below shows, the real story was that of the Real, not Nominal, Disposable Income, adjusted for the cost of living, which declined for the second consecutive month, and shows that the peak this year took place in July, having declined consistently ever since. In other words, even real incomes are now consistently declining, spending aside.
Everyone is safely home, tucked in and patiently waiting for the perfect storm to rage and ravage the Big Apple. Everyone - including the algos in just over 1 hour. Everyone.... except for Friday's "ramp the market in the last hour or else" workhorse - NYFed analyst/trader Kevin Henry...
• Storm tide and surge:
Long Island Sound -- 6-7 feet on top of tide with a 50% chance of exceeding 7 feet. Storm tide forecast for Port Jefferson is 13-14 feet.
Manhattan -- 4-5 feet on top of tide with a 40% chance of exceeding 7 feet.
Staten Island -- 4-5 feet on top of tide with a 60% chance of exceeding 7 feet.
• Wind: Long duration, damaging winds expected. 35 to 45 mph with gusts up to 80 mph. The strongest winds will occur Monday afternoon and night.
• Rain: Widespread totals from 2 to 4 inches, with isolated amounts up to 6 inches, especially in the higher elevations. 1 to 2 inches PER HOUR are expected where the heaviest rain bands set up.
• Inland Flooding: Widespread urban flooding is expected Monday and into Tuesday. Fast-responding streams are expected to flood, as well. The flooding will be exacerbated by blockages in storm drains as well as rising storm tide.
• Power outages: Power outages are possible, even likely, as wind takes down branches and trees.
- Markets Go Dark Ahead of Storm (WSJ, RTRS, BBG, FT)
- MF Global Problems Started Years Ago (WSJ)
- Major Greek daily reprints Swiss accounts list, editor who published list to go on trial for violating data privacy laws (RTRS)
- Coming soon to a USA near you: Hong Kong government imposes a property tax on overseas buyers (Bloomberg)
- The pain in Spain is endless: Spain’s Pain Seen Intensifying as Slump Deepens Plight (BBG)
- Las Vegas Sands Discusses Possible Settlement With Justice Department (WSJ)
- Why Does the SEC Protect Banks’ Dirty Secrets? (BBG)
- Honda slashes forecast on China territorial spat (AFP)
- UBS shares jump on expected radical overhaul (Reuters) ...so if UBS cuts 150% of workforce, shares will hit +?
- CEOs Seeking Global Range Tilts Market to 8,000-Mile Jets (Bloomberg)
It is cloudy out there as Sandy enters the mid-Atlantic region, although for all the pre-apocalypse preparations in New York, the Frankenstorm may just be yet another dud now that its landfall is expected to come sufficiently south of NYC to make the latest round of Zone 1 evacuations about overblown as last year's Irene hysteria (of course it will be a gift from god for each and every S&P company as it will provide a perfect excuse for everyone to miss revenues and earnings in Q4). That said, Wall Street is effectively closed today for carbon-based lifeforms if not for electron ones, and a quick look at the futures bottom line, which will be open until 9:15 am Eastern, shows a lot of red, with ES down nearly 10 ticks (Shanghai down again as the same old realization seeps day after day - no major easing from the PBOC means Bernanke and company is on their own) as the Friday overnight summary is back on again: Johnny 5 must defend 1400 in ES and 1.2900 in EURUSD at all costs for just two more hours.
UPDATE: *CBOE TO CLOSE EXCHANGES OCT. 29 BECAUSE OF HURRICANE SANDY
Late Updates - after a day of consultation and realization that if the algos were left alone to play then things could go a little pear-shaped - NYSE and NASDAQ will now be totally closed tomorrow:
*U.S. EQUITY MARKETS TO CLOSE ON OCT. 29 FOR STORM, SEC SAYS
UPDATE: 37ft waves in Bermuda (compared to 5 feet last week) and a side-by-side of Irene and Sandy
She's wet, windy, and bringing a world of hate to the Atlantic Seaboard - but where did she come from? NOAA offers the complete animated real-life of Hurricane Sandy...